4/22/2008 @ 6:00AM

Eee! A New Cellphone!

Since the Eee PC burst onto the world’s electronics scene last fall, the $400 nearly palm-sized laptop has been a phenomenon. Its Taiwan-based manufacturer, ASUS, says it has shipped 1 million units worldwide through the first quarter of 2008–a success that has helped supercharge enthusiasm among major computer manufacturers to bring out their own ultra-mobile PCs.

Now ASUS is hoping to bring the same magic touch to cellphones by taking a totally opposite strategy: Instead of targeting consumers with limited computer experience and tight budgets, including seniors and children, ASUS is aiming directly for corporate road warriors. Instead of limited functionality, ASUS’s cellphone will offer just about everything but the kitchen sink. The smartphone, called the P527, recently popped up for sale in the U.S.

ASUS’s charge into the North American market follows in the footsteps of fellow Taiwanese electronics company HTC, which began raising its profile and manufacturing high-end cellphones under its own brand in 2007. HTC is expected to be the first company to manufacture a cellphone based on Google‘s
Android technology tools. (See: “Seeking Out Android.”)

Historically, the U.S. cellphone market, with its gate-keeping operators, has been merciless to small players and to new comers. China’s ZTE and Huawei have failed to make significant inroads.

But that legacy isn’t deterring 19-year-old ASUS, which manufactures its products in China and Taiwan. ASUS, which had $7 billion in revenues last year, is eager to build a name for itself among consumers, asserts Kevin Huang, ASUS senior director of marketing.

That will be a big departure for a company that has had a low key presence. In past years, ASUS has built components that go into others companies’ products; it’s a leading maker of motherboards, media cards and networking equipment. It offers a dozen modest cellphones models in Europe and Asia under its own brand, and builds flashier products for its Japanese and Korean partners to sell in markets including the U.S. Tina Teng, a wireless communications analyst for iSuppli, estimates that ASUS’s global phone sales are relatively small, placing it below the top 20 handset makers.

ASUS set its own plans in motion late last year–not just by designing a new line of cellphones but by restructuring the corporation. To minimize conflicts with its Korean and Japanese clients, ASUS parent company ASUSTek split its business into three pieces in January. Now units Pegatron and Unihan handle the outsourced work while ASUS–down to a svelte 8,000 employees from its 100,000 before the split–is focusing on aggressively growing its own branded business.

For its North American launch, ASUS will concentrate on a few productivity-oriented smartphones and target business types–a markedly different audience from the Eee PC. In fact, the first ASUS North American offering, the P527, sells for $500 to $600 online–more than the Eee PC.

ASUS says the P527 has a raft of features, including a touch screen, wi-fi, a camera, Windows Mobile software and a number of practical-minded applications. To distinguish it from competitors like the Samsung BlackJack or
Motorola
Q, ASUS loaded the phone with GPS, an FM radio, a business-card scanning program and a “travel log” feature that lets users record their travels and peg photos to specific locations using Google Earth.

Even more unique: a feature that acts as a remote control for PowerPoint presentations (via Bluetooth) and an “S.O.S.” service that can track a user’s location and send it, along with a text message, to up to five numbers. “We’re trying to get a unique edge by thinking what users would want on the road and how they could carry less gadgets,” says Huang.

iSuppli’s Teng describes the phone as “pretty decent,” but warns that ASUS’ distribution channels will likely limit sales. The company is relying on online retailers such as Amazon and TigerDirect to sell an unlocked version, meaning owners can activate it on the cellular network of their choice. In the U.S., however, the P527′s basic technology–GSM–restricts it to either
AT&T
or T-Mobile service networks.

“Working with operators is the most direct way of getting yourself in front of North American consumers,” says Teng. “Selling online is still very limited and requires a lot of investment in marketing and market research.” Skirting the operators also drives up the phone’s price by eliminating subsidies they could offer consumers to tempt them to buy the phone and its services.

The P527 is a test balloon for ASUS. A handful of other PDA-type phones are likely to follow by the end of the year. One likely candidate is the M536, a BlackBerry rival that sports a large touch screen, full QWERTY keyboard and speedy data connection.

Taking a page from Samsung and LG’s playbooks, ASUS says it is working on joint ventures with fashion companies. It already has a partnership with Lamborghini for which it has produced a special-edition laptop and a cellphone.

ASUS is also making a North American push for its personal navigation devices. The gadgets combine FM radio and MP3, video and photo players with GPS maps, making them more akin to multimedia players than regular PNDs. It all adds up to a sharp company focus on mobile devices, says Huang.

Even amid the new developments, the Eee PC will remain the company star. “We are still focusing more on laptops,” says ASUS spokesperson Debby Lee. In mid May, the company is expected to debut in North America a slightly larger mini-laptop, with an 8.9-inch screen and a “multitouch” touch pad. Its expected price: $549.